13 May 2015

A More Ominous Note May Be Heard in the Global Bond Rout

I was only tangentially aware that there was anything that could be called a 'global bond rout' since I do not follow the bond markets much these days.

But I found this theory below to be an interesting hypothesis, because the state of global growth, and the slide into a secular stagnation in the developed Western economies in particular, is of keen interest to me. If a major market like bonds is seeing the same thing then this would indeed be noteworthy.

It would eventually result in a stagflation, as persistent money printing and competitive devaluations with no resulting organic economic growth might eventually find some inflationary traction, even if it was a break in international monetary confidence, despite the ongoing stagnation in real growth caused by policy errors.

Whatever the cause of this global bond rout, or any other trouble approaching in the gathering storm, I am sure the public will be the last to find out.

"There is a growing concern that the extreme levels of wealth and income inequality here and abroad are creating a permanent, rather than temporary, rate of tepid economic growth worldwide.  This translates into a future where governments are forced to issue ever more debt to plow into fiscal spending to prevent their economies from lapsing into deflation and, potentially, a depression.

Markets trade on anticipation of where economic data will stand three to six months down the road. The big selloff in sovereign debt is telling us that global investors see major economies mired in the hangover of the 2008 crash indefinitely with deficit spending on infrastructure soon to replace Quantitative Easing (QE) as the new monetary tool to ward off deflation...

The global rout in sovereign debt markets is a collective epiphany that we’re six years and counting from the 2008 crash and we’re still on central bank life support."

Read the rest of this at Wall Street On Parade.